Exam 4: Elasticity: A Measure of Responsiveness

Suppose that in a month the price of movie rentals decreases from $3.25 to $3. At the same time, the quantity of movie rentals demanded increases from 100 to 120. The price elasticity of demand for movie rentals (calculated using the midpoint formula) is

Figure 4.3 -In Figure 4.3 the most elastic supply curve

If butter and margarine are substitutes, then an increase in the price of butter will reduce the demand for margarine.

Ceteris paribus, if more alternative forms of energy become available, we would expect the demand for gasoline to become

What happens to total revenue associated with a linear demand curve as price falls?

The supply curve will be more inelastic when

Suppose that the price elasticity of demand for bagels is 1.60, a 10% increase in price will decrease the quantity demanded by 6%.

Which of the following statements is CORRECT with respect to price elasticity of supply?

If the quantity supplied is perfectly inelastic then quantity does not respond to price changes.

Governments like to know the price elasticity of demand because it helps them determine how changes in sales tax rates will affect

Table 4.2 -Refer to Table 4.2. A change in the price of calculators caused the change in quantity demanded shown in the table. The price elasticity of demand for calculators, using the initial-value formula, is

The percentage change in the quantity of bread demanded divided by the percentage change in price of jelly measures

If the number of highway deaths among young people is roughly proportional to their beer consumption and young peoples' elasticity of demand for beer is 1.5, then to decrease highway deaths of young people by 15 percent, taxes would need to be increased enough to increase the price of beer by

If a firm currently sells a product at a point where the price elasticity of demand is 0.5, the firm needs to raise the price to maximize its total revenue.

If the demand for new cars is elastic, an increase in price will result in

If the demand for school ball caps is inelastic, an increase in price will result in

Suppose that the income elasticity of demand for frozen dinners is negative. Other things being equal, which of the following statements is INCORRECT?

Draw the demand curve for a good whose price elasticity of demand is equal to infinity. Be sure to label both axes.

If the demand for a product decreases by 16 percent and the supply elasticity is 1.2 and demand elasticity is 0.80. Then the equilibrium price will decrease by 6 percent.

If an increase in the price of good X results in a decrease in the quantity of Y demanded